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Whether your child wants to be a botanist, a civil engineer, a social worker or a philosopher, the one thing that he or she needs to know before they graduate is about smart money management. He or she needs to understand loans and credit card terms, how to accurately balance a checkbook and create a budget – as critical life skills. If they learn financial literacy when they are young, this will not only help them manage their own finances but will enable them to better understand business financial matters as they go on to develop their careers.
A few great programs and initiatives
Fortunately, there are some good initiatives and programs available that can help teachers and parents get a conversation going and the education process started. For example, there is a national coalition of organizations called the Jump $tart Coalition for Personal Financial Literacy whose mission it is to improve the financial literacy of pre-K through college-age kids. Junior Achievement is another nationwide program that connects students with today’s business leader through a variety of programs. And Northwestern Mutual has a site titled TheMint.org that has great financial tools and tips for kids, parents, teachers and tweens. Your kids could use this site to learn various money management skills from how to earn and save money to how to track spending and make investments.
Trial and error
Most of us learned about smart money management by making dumb mistakes. As you may have learned on your own, financial literacy doesn’t just happen and very few people are born with a smart money management gene. These initiatives and organizations mentioned above are attempting to provide children with a better start on managing their finances by giving them a jumpstart on financial literacy.
Young people and the DOD
Our Department of Defense has seen that young people are not coming into the armed services with the knowledge required to successfully manage their finances. And it believes that it’s impor
tant for service members to have the life skills required to successfully manage their finances and create good credit ratings. As a result, the DOD begins training people financially as early as basic training and then offers financial guidance throughout their careers. It believes that the more information their service members have about making choices the faster their credit scores will go up. And when service members have good credit ratings they are able to get credit cards and loans and pass the credit checks required to rent apartments.
One spokesman for the Defense Department said that there are numerous resources available to help with financial readiness. There are installation family centers with personal financial managers that are available to help service members develop plans for reducing debt and for spending. There are also many credit unions and banks on military installations that offer these services. Finally, there is the Military OneSource website. It provides downloadable podcasts, articles and CDs on becoming financially fit. Plus, the site has certified financial counselors that can help service members manage their debt. These people are available face-to-face or online.
Questions to ask your children
Of course, one of the best ways to teach your children smart money management is by being a good role model. Beyond this, there are some questions you could ask your teenagers to start discussions about finances and here are 10 of them.
- Could you live on the federal minimum hourly wage that is $7.25?
- If not, how would you get your boss to pay you more?
- How many hours do you think you would have to work to pay for new tennis shoes?
- Should you be paid to do household chores?
- What's the difference between a checking account and a debit card?
- Why do the credit card companies charge different interest rates?
- Do you think you would be able to save one dollar every day from now until Christmas?
- What do the letters CD stand for besides compact disc?
- What would you do with the money if you got $100 for your birthday?
If your teenagers can successfully answer all or most of these questions, you will at least know that they're on their way to financial literacy. If not, you definitely have some work to do.
You don’t have to wait until your children are teenagers, either. As the following video demonstrates, you can start teaching them financial literacy when they’re as young as five or six.